Research article

Vibrant value

Spain’s residential markets offer iconic style and culture. They are also home to some of the best value prime property in the world

Globally, prime residential market values are slowing, as a combination of government policy, the cost of money, increasing supply and global economic uncertainty impact sentiment. The Savills World Cities Prime Residential Index recorded a growth of just 0.4% over the first six months of 2019, taking the annual growth to 0.7%. This compares with an annual increase of 5.1% in the year to June 2018.

Spain’s prime markets

Madrid has proved relatively resilient to global headwinds. It slightly outperformed the index average, with prime residential values increasing by 0.9% during the year to June 2019. However, over the longer term, prices are still 11.3% lower than a decade ago compared with an average growth of 82.3% across the index.

In a global context, Spain’s prime markets offer value for money. Madrid has the most expensive prime property in Spain, with an average value of €7,000 per sq m. This represents a discount of 23.1% compared with Berlin, 60.5% with London and 84.6% with Hong Kong, the most expensive city in the world for prime residential property.

In Barcelona, prime values are 11.4% cheaper than in Madrid, standing at €6,200 per sq m. This leaves prices 8.8% more expensive than Dubai and 24.0% higher than Valencia, which, at €5,000 per sq m, is the most affordable of Spain’s three largest cities. In both Madrid and Barcelona, prime values can reach €15,000 per sq m for the highest-quality new build apartments.

As for Spain’s resort locations, average prices on a per square metre basis in the Costa del Sol are nearly 50% higher than in the Costa Brava. At a local level, Marbella is 50% more expensive than Malaga.

Costa Brava

Tossa de Mar, Costa Brava

International buyers

Spain remains a popular destination for visitors, investors and those looking to relocate to the country. It is a safe and stable country with a rich cultural tradition, and benefits from a favourable climate, beautiful beaches and a relaxed lifestyle.

International interest from buyers both inside and outside of the EU is increasing. In 2018, just over 100,000 homes were purchased by overseas buyers, accounting for nearly one-fifth of all sales.

British buyers continue to make up the largest group of foreign nationals buying property in Spain. They accounted for 14.8% of purchases in 2018, followed by French and German buyers at 7.9% and 7.6% respectively (see chart below). This indicates that the uncertainty leading up to Britain leaving the EU has not deterred buyers from investing in or relocating to Spain.

During the past five years, the number of international buyers has nearly doubled. This increase coincides with the introduction of Spain’s golden visa scheme. This allows non-EU nationals to obtain residency in Spain if they invest half a million euros or more into real estate.

The scheme has driven foreign buyers to the Spanish prime markets, particularly from Morocco, China and Russia. There is also rising demand from Spanish-speaking South America. Some of the largest growth over the past five years has come from buyers in Ecuador and Argentina, with numbers rising by 270% and 150% respectively.

Prime spot for branded residences

It is testament to Spain’s prime residential market recovery and its appeal among international high-net-worth individuals that its first branded residential projects will be completed in the next few years.

As many top-tier world cities look fully valued, operators and developers of branded residential product are looking to alternative urban centres and resort locations for new opportunities and growth, and Spain is part of that story.

There are several branded residential projects planned or under construction in Spain. Some of the top hotel and hospitality brands, such as Four Seasons, Mandarin Oriental, Six Senses and W, are targeting the key business hubs and tourist destinations, including Madrid, Barcelona, Ibiza and Marbella. The Mandarin Oriental Residences, Barcelona, at Passeig de Gràcia 111, has set new price records for the residential market in the city.

Prime residential outlook

Demand for luxury real estate remains high across Spain. Wealthy Latin American buyers continue to relocate for economic and political stability, particularly to Madrid. Domestic demand, however, will be driven by wealth generation as the economy grows.

Wealthy Latin American buyers relocate for economic and political stability. Domestic demand will be driven by wealth generation as the economy grows

Savills World Research

The strong interest is expected to lead to continued price increases. New product is needed to meet the demand, as illustrated by the emergence of branded residences.


The Mandarin Oriental Residences, Barcelona, at Passeig de Gràcia 111

The Mandarin Oriental Residences, Barcelona, at Passeig de Gràcia 111

The average rental yield for prime residential properties in Madrid and Barcelona sit at 3.0% and 3.5% respectively. Barcelona’s more competitive returns for property owners is a result of the lower capital values.

Barcelona ranks above its European peers, Paris (3.3%) and Berlin (3.1%), while both Barcelona and Madrid a higher average rental yield than London (2.9%).

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